Buzz Bits: Dow, Nasdaq Sink
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Bell Buzz - Todd Harrison - 3:42 PM
- In like a lamb, out like a chop? Yeah, it sure feels like our levels of lore will be next week's business.
- Pep's point regarding the composition of acne and angst (breakouts and breakdowns) is worthy of a second read.
- Maybe I'm talking my book but I think the content was exceptional this week. Many humble thanks to our awesome professors and the hard working MVHQ editorial squad.
- I just wanted to make sure Minyans saw this article. Nobody I speak with thinks we engage Iran, for what it's worth. Scary thought indeed.
- It's pretty amazing how many John Denver fans there are out there. For the record, I'm long both Bob Denver and John Denver and short the Broncos against 'em.
- So you know, I'm playing that second link above and Jeff Macke popped up, ran into my office, grabbed a cowboy hat, put a piece of straw in his mouth and starting singing Rocky Mountain High. (I know, that's a tough image to swallow). By the way, if any Minyans wanna webcam on Fast Money, click here!
- I'm outie, Minyans--have a fantastic respite and I'll see you on the other side of the mindful toggle.
Them's The Breaks - Kevin Depew - 2:44 PM
Take a close look at the breakouts and breakdowns over the past few days. The thematic elements are in place for something significant to begin taking place.
Breakouts over the past few days can be characterized by the optimistic relative value plays in tech, along with a handful of materials plays and metals shares, and a number of oversold breakouts within larger downtrends for some of the energy stocks.
Meanwhile, on the downside, note the increasing breakdowns in financials, building-related stocks and real estate-related shares, including some of the REITs.
We've talked about the importance of financials as a harbinger of a meatier downside move. We're not there yet; the point and figure indicators remain controlled by demand. But the pieces of that larger puzzle do appear to be gathering piece.
The GOOG Exchange - Adam Warner - 12:11 PM
Google's (GOOG) program that allows employees to sell their options in some form of an internal marketplace is about to happen. Sort of, as per Footnoted...
The dynamics are not all that important IMHO. But if you're interested, here's the prospectus.
Basically, an employee can post what they want to sell, and the financial institutions who participate are obligated to show some sort of bid. The bid can be 0 if they so choose.
Microsoft (MSFT) had a somewhat similar program a few years back, although the crucial difference was that it was a one shot deal to sell your options. And there was only one financial institution to sell to. My thought at the time was that the bidder (JP Morgan (JPM) or Morgan Stanley (MS), I never remember which one) would lowball the employees and get some options ridiculously cheap. But they actually miscalculated and became a self-fulfilling prophecy of declining volatility that turned it into an awful move on their part.
GOOG has a better design in that the employees don't all sell in one shot, and there will be more than one buyer on the other side.
But the effect is going to be similar. It is going to take an overhang of option paper that exists only in the netherworld and put it into accounts that are actually going to hedge it. Which will serve to (1) lower option volatility as they hedge some of the calls they buy with other calls and (2) lower stock volatility as call buyers hedge with short stock and then either sell more as it lifts and their calls pick up delta, or buy back stock in dips as the calls decrease in delta and value.
And as the stock gets tighter, the options will get cheaper. And so on and so forth in the Volatility Circle of Non-Life.
Position in GOOG
Randoms - Fil Zucchi - 11:47 AM
As I ready to leave my turret for the weekend, a few quick thoughts:
- Once upon a time Pepe described the market as neither a bull nor a bear, but simply weird. If the market of the past few months has been weird, today's action feels like the Minx forgot the lithium.
- The precious and oily ones are going nutso. I am using the strength to buy some insurance that will allow my Hoofy (and beefy) positions to run without too much angst.
- I'm back on the darkside of the homies. More on that next week.
- What's up with SIRF? I'm swapping out of the stock and into calls - they are not cheap, but they let me book a decent gain.
- Chesapeake Energy's (CHK) numbers were pretty "large" last night. This is a core holding for me, and the chart is tempting to add.
- What's down with the CME? Is that a tell?
Positions in XHB, SIRF, CHK, precious metal and energy equities
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